Finding the right home insurance is important, but you shouldn’t have to overpay. That’s why it’s crucial to shop around and find the right cover.
Home insurance premiums are on the rise.
The average price of a household combined buildings and contents policy in the third quarter of 2024 was £407, according to the Association of British Insurers (ABI), 3% higher than the previous quarter and 16% more than in the same period last year.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The ABI said the huge increase in premiums is due to adverse weather events that are becoming increasingly common – and mean more claims for insurers to cover. In recent months, storms like Babet, Ciaran and Isha have wreaked havoc on households, with damage claims reaching £144 million between April and June 2024.
Insurers have paid out record amounts for home insurance claims so far this year, according to the trade body, at £1.3 billion during the third quarter and £4.1 billion in the first nine months of 2024.
This has pushed up premiums but claims are also more expensive, added the ABI.
The ABI highlights that when adjusting for inflation, the average premium paid is comparable with prices paid in the third quarter of 2017. Meanwhile, the equivalent average claim paid is 72% more expensive than the same period.
The good news is that there are still ways to trim your premiums without compromising on your cover. We explain how.
How to cut home insurance costs
1. Combine your home insurance policies
Instead of buying separate buildings and contents cover, a simple option is to combine your policies, as most insurers are likely to give you a discount for buying two policies from them.
Contents insurance covers your home possessions in the case of any loss, theft, damage or destruction. It usually includes anything that’s not a property fixture (i.e. that you could take with you when moving home), such as furniture, appliances, clothing, electronics, furnishings and personal items. You’ll pay more for accidental damage cover and for cover away from the home.
On the other hand, building insurance covers the damage repair cost of your home in the case of a fire, flood, storm or vandalism. Most buildings insurance covers the cost of damage to walls, roofs, floors or any other fixtures.
2. Pay for your insurance annually rather than monthly
Another good option is to pay for your insurance annually rather than monthly. Many people choose to pay monthly as it seems easier to pay in small chunks than one lump sum. But you will pay more in the long run because insurance firms charge more if you choose to pay monthly.
That’s because monthly payments are treated as a credit agreement and they charge for providing that credit service. You’ll have to sign a separate credit agreement and the total amount will be more (sometimes a lot more) than if you pay in one lump sum. On average a home insurance policy costs 17% more if you pay monthly, according to Go Compare.
A more cost-effective way to pay, if you don’t want to pay the full amount, is to put it on an interest-free credit card and pay that off in monthly payments instead.
| Header Cell - Column 0 | Average total cost for monthly premium | Average cost for an annual premium | Cost-saving with an annual premium |
|---|---|---|---|
| Combined home insurance | £303 | £251 | 17% |
| Buildings insurance | £240 | £201 | 16% |
| Contents insurance | £112 | £85 | 24% |
3. Improve your home security
You may also want to consider spending a little money now to save you money on your premiums in the years ahead. For example, upgrading your home security could save you money in the long run.
“A safer lock can drastically lower the cost of your policy, as it demonstrates you are proactively reducing the risk of a break-in and needing to make a claim,” Chris Lear from insurance broker One Sure Insurance told The Telegraph.
He recommends fitting a five-lever mortice deadlock that conforms to British Standard 3621. “This is considered the most secure type of lock not just by insurers, but by police as well. If you have one on your front door, you are likely to be able to bag a cheaper policy from your provider.”
Lock manufacturer Yale suggests that upgrading your home security could shave up to 10% off your premiums.
4. Join a local Neighbourhood Watch scheme
You could also join – or set up – a local Neighbourhood Watch scheme. These schemes are used to reduce local crime. It also means that if your area has less crime, there are lesser chances of you having to make an insurance claim. When insurers recognise this and see that you’re part of the watch, it can typically reduce your premiums by 5%.
5. Check your policy and think about skipping the extras
Consider what you are paying for. There are several extras you can add to your policy that will increase the cost, but you may not really need them.
- Emergency home protection (relating to heating, plumbing and drainage crises) usually adds around £40 a year to your insurance bill, Peter Smits of insurance broker Ashbourne Insurance told This Is Money.
- Accidental damage cover bumps premiums up by an average of 10%.
6. Don't forget your no-claims bonus
Finally, don’t forget your no-claims bonus. Insurers love customers who pay them premiums but don’t make a claim. So, they will give you a no-claims bonus. Even a one-year no-claims bonus could cut your insurance by 10%, rising to as much as 50% if you have five years or more without claims, says Go Compare.
7. Increase your excess
Another way to cut your premiums is to increase your excess. If you are happy to pay more if you do make a claim, your premiums will fall substantially. For example, putting your excess up to £400 from zero could reduce your premiums by around 25%.
8. Check admin charges
Insurers often impose administration charges to your policy which you may not notice initially. You could be charged when you cancel your policy or if you make any changes to your personal details, like switching banks, or if you pay monthly and miss a payment. The Post Office for instance charges £10 a time for policy changes, even when you make them yourself online.
That’s why it’s important to understand what you could be charged for on top of your premium to avoid unnecessary and unexpected costs.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Related stories
-
Will the Bitcoin price hit $100,000?With Bitcoin prices trading just below $100,000, we explore whether the cryptocurrency can hit the milestone.
-
Inheritance tax receipts jump 11% even before Autumn Budget overhaulOfficial figures show inheritance tax receipts are rising even before the chancellor’s changes to reliefs
-
Lock in an 11% yield with SabreTips Sabre, a best-in-class company is undervalued due to low profits in the motor insurance industry. Should you invest?
-
Are insurance companies a good investment?Costs may be soaring but the insurance sector is currently going through one of its most profitable periods. The market has been slow to realise the opportunity here
-
Should you buy pet insurance or “self insure” your furry friend?Advice More people are giving up their puppies as veterinary costs are soaring. Are you better off self-insuring to save money and hold on to your hound?
-
How new technology is disrupting the insurance industryAnalysis Challenger firms are helping to change the industry, but incumbents will take the rewards, says John Chambers.
-
Insurance renewal quotes: new rules mean you may not have to switchAdvice Consumers have long complained that car and home insurance renewal quotes rise every year unless they switch. But from next month, insurers will be banned from penalising long-standing customers.
-
Why you should expect higher insurance premiumsAdvice Car and home insurance will be more expensive once the country fully re-opens.
-
Travel insurance: are you covered for Covid-19?Advice Most travel insurance offers limited protection for holidaymakers, so if you’re planning a holiday, make sure your policy covers everything you need..
-
Not been driving much? Here's how to save money on costly car insuranceAdvice If you've not been driving your car much lately, it’s important to shop around for a better car insurance package, says Ruth Jackson-Kirby.
